June 1, 2022

How to do carbon accounting, and why you should care about it

Astrid Birk Nicolajsen
Project Development Manager, Sustainability
Competitive Advantages

Planet and profit are not opposites

It goes without saying, the overarching driver for organisations to measure and cut emissions is that our planet needs us to. Businesses globally are responsible for most of the CO2 emitted into the atmosphere, which is why they also hold the power to accelerate the green transition and shape the future of our planet.

Contrary to popular belief planet and profit are not each other’s opposites. In fact, becoming greener is - and will increasingly become - a competitive advantage for those doing it right.

There are many commercial benefits from reducing your CO2 emissions:

  •  Increasing sales and customer loyalty

The marketplace for low-emission products and services is increasing globally, climate performance is increasingly becoming an evaluation criterion in private and public tenders and many organisations are looking to engage in long-term green partnerships.

  •  Efficiency and cost savings

In many cases cutting emissions means cutting cost: Lowering material use, decreasing number of flights, and saving utility cost through energy efficiency projects, to just name a few.

  • Driving product and supply chain innovation

Identification of emission hotspots improves the ability to find opportunities to make new, innovative solutions targeted to the environmental-conscious marketplace.

  •  Limiting and mitigating supply chain risk

Carbon-intensive suppliers are more vulnerable to changes in the regulatory landscape, carbon taxes and increasing utility cost. Targeted emission cutting efforts can help improve resilience down the chain.

  •  Compliance towards national and regional regulations

Mandatory reporting on company emissions is introduced or pending in many regions of the world.  Non-compliance towards legislations can in the long-term result in fines and adverse publicity.

  • Gaining trust from investors and shareholders

Most investors have incorporated sustainability criteria into their investment processes and are demanding compensation for their exposure to carbon emission risk.

  • Favorable corporate loans

Several financial institutions offer loans with sustainability-linked pricing.

It’s more than just carbon accounting

To drive the change, commercially and environmentally, organisations should rather spend resources on reducing emissions than doing carbon accounting. However, to target the emission hotspots, gaining complete and detailed insight into your carbon footprint is a necessity.

Unfortunately, many companies today struggle with exactly that: getting an overview of their complete climate impact. Carbon accounting is too often based on scattered spreadsheets kept by various stakeholders, making it hard to keep a consolidated overview, avoid double counting and capture the impact of reduction efforts.

The struggle is no surprise. Measuring a company’s complete CO2 emissions is not a simple task and the scope of carbon accounting is widespread, complex, and diffuse. According to the leading standards of the Greenhouse Gas Protocol complete carbon accounting should cover both the direct emissions generated as part of a company’s business activities (scope 1), the indirect emissions generated by the production of purchased energy (scope 2) and the sizable amounts of emissions occurring in the supply chain of a company (scope 3).

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Technology can help overcome the complexity

Looking at the Greenhouse Gas Protocol scopes, it is clear: No one-data-source or calculation method can cover everything. Reporting on all scopes requires access to a range of fragmented data sources, data-sharing inter-and cross-company along with handling of multiple accounting methods. Especially scope 3 can be a challenge due to scattered, unavailable data and lack of maturity in the supply-chain.

Moreover, carbon accounting is not a one-time job but has to be done continuously. Capturing the effect of reduction activities is only possible through consistently keeping track of an organisation’s complete carbon footprint and tracking the development of emissions.

This is where technology comes in handy. Dedicated software can help organisations overcome the hassle and complexity of carbon accounting, juggle different quantification methods and keep figures reliable and continuously updated. Using these programs can significantly decrease processing time, ensure compliance towards reporting standards and release time for targeted reduction activities. Because that is what it should be all about: Cutting emissions.

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Sources

  • Greenhouse Gas Protocol; “A Corporate Accounting and Reporting Standard” [Revised version]
  • Greenhouse Gas Protocol; “Corporate Value Chain (Scope3) Accounting and Reporting Standard”
  • Science Based Targets; “Value change in the value chain: Best practice in scope 3 greenhouse gas management”
  • CDP Carbon Majors Report, 2017
  • International Finance Corporation, World Bank Group | Climate Finance